A Silver Short Squeeze?

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Gold Market Discussion

Is a short squeeze developing in the silver market?  A short squeeze is an exciting market event in which rising prices give rise to still more rising prices, which in turn give rise to more… Well, you get the idea:  sharply higher prices!

“Shorts” are speculators who have sold silver for future delivery in the hopes that as that date approaches, they will be able to meet their obligation by buying at lower prices.  They hope to profit by the difference in those prices.

But if silver prices are actually higher as the date nears, they have to buy at those higher prices to meet their obligations.  And that additional buying (called “short covering”) drives rising prices higher still, which stampedes other shorts to cover their positions with more buying.  

And so it goes.

Here is some of the evidence that a silver short squeeze may be in development.  As I write this, silver is up more than 13 percent since the end of May.  It has even begun now to outpace gold.  

As a consequence of this silver strength, the gold/silver ratio that we have written about many times (most recently here) has begun to trend lower.  The ratio peaked just two weeks ago at 95 to 1 and as I write is now just below 88 to 1.

Update (7/24/19): as we’ve been saying all along, the ratio keeps gradually shrinking, and the investment opportunities are shrinking along with it. Today the ratio is down to 86:1.

Two takeaways for our clients and friends:  If a silver squeeze is underway, you can expect a dramatic (and sometimes very dramatic) increase in silver prices.  Your RME Gold professional will monitor all the latest developments and is prepared to advise you how to emphasize silver in your portfolio to take advantage of the move.  

The turn-down in the gold/silver ratio also provides you with an important reminder about the potential gains available by trading gold for silver.  Be sure to discuss this important and time-tested strategy.  There is still time.

A FOLLOW-UP ABOUT DEUTSCHE BANK  

Deutsche Bank

Last week we wrote about troubles at Deutsche Bank, the German banking giant.  We wondered it was the “key log” in the banking log-jam like Bear Stearns and Lehman Brothers were a decade ago.  Their collapses led to a torrent of other collapses, a chain of destruction that became known as the Great Recession and Mortgage Meltdown.

Today we note that others are wondering the same thing.  Zero Hedge reports that Deutsche Bank clients are pulling a billion dollars a day from the bank.  “The similarities to Lehman Brothers are growing by the day,” it writes. 

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